The myth of the rational voter

There is according to Bryan Caplan a huge gap between what economists and the general public believe when it comes to public policy. Voters, he says, are often wrong because they respond in an emotional or irrational way. He also argues that voters in the US aren't necessarily motivated purely by self interest.

Transcript

Michael Duffy: Let's start with the question of just how much voters really understand about matters on which they vote, such as the economy. Bryan Caplan is Associate Professor of Economics at George Mason University in America, and he's just published a book called The Myth of the Rational Voter. It's been getting a lot of favourable attention from some American academics because it overthrows some established views on human behaviour. Bryan, welcome to Counterpoint.

Bryan Caplan: Thanks for having me.

Michael Duffy: This idea that voters are rational is firmly entrenched among economists. Where does it come from?

Bryan Caplan: In the 1970s, economists started taking this assumption that consumers and firms were rational and run by rational people and started putting it into their work and realised that it gave them some very interesting results. It certainly helped them to explain a lot of things that were going on in the world. And once the assumption seemed to be working in any area, they basically started applying it to any area they could find and once that happened it became very hard to question the assumption at all because people could always say, 'Look, it worked in this one area and we should just follow through, stick with what we're doing and see where it goes.' And on top that of that, especially for academic economists, there's some very nice mathematical properties of rational voter models where once you have the assumption of rationality you can reason very clearly about what's going to happen, just the fact that it gives a very aesthetically pleasing conclusion, in a way why it's influencing people and making them think that's how the world really is, although it doesn't make a lot of sense.

Michael Duffy: That's amazing, I love it, that the theory fits in with the tools that people want to use and therefore they accept it.

Bryan Caplan: Yes, exactly. So there's an old saying; if the only tool you have is a hammer, everything looks like a nail.

Michael Duffy: That's right. This is really interesting. What brought you to question this?

Bryan Caplan: When I was in graduate school I read a book called The Myth of Democratic Failure by an economist named Donald Wittman, and basically what he did in the book is say, look, economists have a lot of complaints about democracy not working very well. They've said, for example, that democracy tends to deliver a lot of wasteful spending, it's called 'pork barrel' spending. What Wittman did is said, look, in order for these kinds of conclusions to get off the ground, you've got to assume that voters are not rational. And reading this, I think he's actually right. I think in order for many of these conclusions to go through you do need to assume that voters are not rational. Now, for Wittman, he was basically saying, look, we all know the voters are rational so therefore these conclusions are wrong. And I'm not so sure that the usual conclusions are wrong, I think maybe we just have the wrong assumption.

Michael Duffy: Let's talk about the ways in which voters are irrational in terms of economics. First of all, in a very general sense, do American voters really have much of an idea of, for example, how the US federal budget spends their taxes?

Bryan Caplan: No, definitely not. In terms of that very specific question, what you can see is that people very much underestimate the amount of money that goes for programs for the elderly. So in American terms those are the social security and Medicare and actually also Medicaid. These are actually among the very largest programs in the budget but most people don't realise this. On the other hand, the programs they think are very large are foreign aid, which is minuscule, and welfare which is quite a bit larger than foreign aid but still not that much in the broad scheme of things.

Michael Duffy: So their economic views are actually tied in very firmly to something else, possibly feelings, fears, whatever.

Bryan Caplan: Right. The way that I like to think about it is that people practice what I call moral causation. They think, look, if there's something wrong with the budget and somebody is to blame, who is it to blame? Well, it can't be old people because we love them. So therefore it's got to be somebody else and maybe it's people cheating on welfare, we're not too fond of them, or maybe it's foreigners, the best scapegoat of all because we really don't like them. I don't think Americans are particularly bad on this count, but it does seem to be common around the world that people are not all that fond of people from another group.

Michael Duffy: It seems to be the case, and let's talk about some specific economic beliefs. Obviously immigrants are foreigners...what do most Americans think about them in economic terms, and are they right?

Bryan Caplan: There's a number of ways that you can come at this but essentially what you can see is that virtually no one in public opinion polls wants to increase immigration and a very small percentage wants to keep it at its current level, and you'll have very large majorities for decreasing it somewhat or decreasing it a lot. There are actually many arguments against immigrants but a lot of it comes down to various economic complaints, and it turns out that, on inspection, most of these complaints are either exaggerated or simply false or at least very one-sided.

Michael Duffy: The argument we often hear in Australia is that immigrants take jobs. Is that a belief in America too?

Bryan Caplan: Oh yes, a very strong belief in America. There's some question as to whether they actually take jobs or simply reduce wages. The key thing to keep in mind here is that if you look at all the evidence about the effect of immigration on wages, immigration on employment, essentially among economists who've looked at it, the range of opinion...and there is of course some disagreement, but the range goes somewhere from 'immigrants have had basically no effect on the wages of low skilled Americans' to 'immigrants have maybe reduced the wages of low skilled Americans by maybe 8%'.

Michael Duffy: Is that a rational belief?

Bryan Caplan: These are from economists who have at least looked at the data and I think they made a genuine effort to get to the facts. So you wind up having a distribution of beliefs, but it really is a pretty narrow range to say that all the immigration of the last 30 years has depressed wages by 8%...

Michael Duffy: What would the general population think about that?

Bryan Caplan: I think that not only would they think it was a lot more, I think they would get very angry. If you were to say 8%...what do you mean? Do you mean 80%?!

Michael Duffy: Okay. Now what about some other economic beliefs? What is the gap between what the general public thinks about, for example, free markets and what economists think?

Bryan Caplan: In a way, if you were to say what is the biggest difference between the way that economists think and the way that the general public thinks, it comes down to beliefs about markets. So for economists the key thing is that the fact that people in markets are out to make money in no way implies there's going to be bad social consequences. People can have greedy and selfish intentions, and yet that can very easily lead to very good results for society overall. Just think about the case of, say, a waiter who isn't motivated by money. How are you going to get him to bring your food? How are you going to make sure that the food is the food that you want? I'm not sure how tipping works in Australia but...

Michael Duffy: No, we do tip here.

Bryan Caplan: You do tip. So in places where tipping is practiced, part of the reason why servers are trying to do a good job is they're out for some money, and if you imagine the frustration of having a waiter who didn't care about money...it would be very hard to get good service. 'I'm not tipping.' 'I don't care, I'm not interested in money.' That would be a very difficult situation, and that's just one example. This is the way that economists see things. This is in contrast to the way the non-economists see things which is to just look at the intentions, to say the intentions are greedy, the intentions are selfish, therefore the results are going to be bad for society overall. And really not only is that not necessarily true, normally it's not true. Normally the very fact that someone can make some money by serving your needs is a way that leads to an outcome that's good for both sides.

Michael Duffy: What about another aspect of markets; free trade between nations, which I know is something of an issue in America and it has been in Australia, globalisation. I think most economists would agree that that has produced phenomenal benefits for large numbers of people. What would the general American public think?

Bryan Caplan: Yes, the American public is much more sceptical about free trade than economists are. In terms of thinking that imports from foreign countries are hurting us, that's a very widespread view. Basically economists will see something like 95% saying free trade is good for most Americans. It's interesting, right now support for free trade has actually recently peaked in the US at about 40%, so that is an historic high. There are still markedly more people who are against free trade than are for it, but actually by historical standards we're doing pretty well. Back in the 70s it was more like 20% of Americans leading towards free trade.

Michael Duffy: Looking at the economists for a moment, as a matter of interest, their beliefs, are they partly a function of their political views? Are most economist right wing?

Bryan Caplan: That is a great question. Economists are generally seen as being very right wing but they aren't. The typical economist is a moderate Democrat. He is, however, a moderate Democrat who thinks that downsizing is good for the economy, which is of course a belief that most Democrats would be appalled by. Do you use the word 'downsizing' in Australia?

Michael Duffy: We do, yes.

Bryan Caplan: So in any case, a typical economist is a moderate Democrat and says, you know, this downsizing is good for all of us in the long run. And even though, based upon his political identity you would think that he would be very sympathetic to arguments against downsizing. The economics winds up overshadowing the political orientation, and even from an economist who sees himself as being a moderate of a liberal Democrat, very commonly they'll say things like, look, if we stopped downsizing in the 19th century we'd all still be in farming, you don't want that, do you?

Michael Duffy: Let's get back to irrationality. What can be done about it? And can good leaders educate voters about economics? Has anyone tried?

Bryan Caplan: That is a very good question. I'd certainly like to encourage leaders to educate voters about economics, although I have a feeling that if I actually gave this advice to someone he would lose and then come back to me and say, 'Why did I listen to you?' In general it is hard for politicians to play the role of the professor or the educator and get up and say, 'Look, the American people want this,' or, 'The Australian people want this but it might not be such a great idea and here's why.' If you were a master of rhetoric maybe you could get away with that occasionally but it's not very easy, and generally the way the politicians get ahead is by telling people what they want to hear. This doesn't mean that nothing can be done at all. I think the first step is just making the simple point, look, the majority can be wrong, it's possible, and then backing that up with some examples. Just getting that idea out because...in American politics, just the idea that the American people want something and they're mistaken is almost unknown. It's almost as if the mere fact that the majority of people think something makes it true, which no one would believe in science but somehow for economics, for economic policy people are willing to go with that.

Michael Duffy: Bryan, let's assume you've proved voters aren't rational in the sense of knowing how the economy works and how markets work, are they at least rational in the sense that they vote for what they perceive to be their own best interests?

Bryan Caplan: There's been a lot of work by political scientists looking at whether or not people vote with their pocket books, or in other words whether they vote what is objectively in their self-interests, and the surprising answer (which is very strongly established for the US) is no. People generally vote for what they think is good for the country overall, not really what is good for themselves personally. This does vary a bit from country to country, and in particular countries that have more of a sense of class. All Americans think they're middle class pretty much, but countries where there's more of a class identity this might not be as true.

But it is very well established that, for example, support for high taxes on the rich is extremely common among the rich as well as among the poor in the US. It's not something that the poor want and the rich oppose, and you can see this on many other issues. Any time that you're willing to actually specify what is in people's interest, and then see whether or not it actually works as a predictor of what people think, it doesn't work. So in the United States, while there is a popular stereotype that Republicans are rich and Democrats are poor, that effect is so slight...there's a grain of truth in it but it's a very small effect. You have many very rich Democrats and many very poor Republicans.

Michael Duffy: So what about 'pork barrelling'? We often hear in the United States, and of course elsewhere, that politicians in a sense seek to buy votes by passing laws that favour certain groups of people. Are you suggesting that doesn't work?

Bryan Caplan: I think what's going on is actually quite a bit more complex. One nice example is support for farm subsidies. In the US, farming is concentrated in a small number of states; we call them farm states, unsurprisingly. While economists tend to imagine that it's the farm states that want farm subsidies and the rest of the country doesn't, that is completely untrue. Basically what you see is that about 80% of the population in both farm states and non farm states support farm subsidies. It isn't really based upon whether you're a farmer or not a farmer or whether you're in a farm state or not a farm state, it just seems to be that most Americans think that that's what's good for the country and then they support it. Then you have the economists on the sideline saying, look, you're doing what you think is best for the country but you're wrong about what's best for the country, actually we would be better off with a free market in agriculture.

Michael Duffy: Is there any degree to which irrational voters are irrational in different ways and cancel each other out, or in general do most voters tend to be irrational in the same way?

Bryan Caplan: Yes, that's actually the motivation for my entire book in a way because most economists who hear about voters, voter ignorance or voters not knowing what's going on, immediately just say, well, that's fine because there'll be some other people who think exactly the opposite and will cancel them out. Most of what I show in the book is that that's just wishful thinking. When you look at the data you'll see that the public tends to cluster around the same errors. So things like underestimating the benefits of markets are very widespread, it is the standard mistake and it's very hard to find people who irrationally overestimate markets, who think that if you adopt a market that we will all be healthy, happy and beautiful as a result the next day. It's very common to find people who think that the very fact that you have a market means that it's going to lead to a bad outcome for most people.

Michael Duffy: Bryan, we've been talking about economics...just very briefly, what about other subjects? Do you think voters are equally irrational in other areas as well?

Bryan Caplan: Economics is my specialty but I'll go out on a limb and say yes, I think there's a lot of other areas where I think the beliefs that voters have don't make a lot of sense. Just to take an example that might be on some of your listeners' minds, the American support for the war on Iraq, which actually follows some very standard patterns. The first pattern is that merely declaring war makes wars popular. So public opinion researchers call this the 'rally round the flag' effect. All you have to do to make people believe that a war is a good idea is just to do it, and you'll suddenly see an enormous change in people's minds as people rally round the flag and say we're fighting this war and therefore to say this war is a bad idea would be to say we're bad people and we know that's not true, and therefore the war must make sense.

The second interesting thing about public opinion on war is that even when wars go about as well or as badly as anyone could have expected, support tends to decline over time. So just the fact that a war has gone on for three years, even if anyone who thought about it would have said that it would last three years, generally you'll see the support decline by that point. And so the very same people who rallied around the flag and got very excited about having a war and thought it was a great idea, in a few years, even if it went about as well as they should have expected, they're going to turn against it and want to pull out. So you can actually get the support for the invasion which doesn't make a lot of sense, and then you can get follow-up support for a sudden pull out which will leave things worse than they were before.

Michael Duffy: What does what you've been saying mean for democracy? I mean, one of the implications almost appears to be that the fewer areas of life that democracy or governments have to deal with the better because democracy is a fundamentally irrational process.

Bryan Caplan: Yes, I think that that conclusion is definitely a good one to draw. I don't know quite how constitutional rulings work in Australia, but in the US we do have a long tradition of having courts that just overturn democratic decisions on the grounds that they are unconstitutional. For example, freedom of speech, freedom of religion, even if the majority of the US wants to infringe those, the Supreme Court will still generally say no, sorry, you can't do that, that isn't an area where democracy gets to make the decision. What I've suggested is there are probably a lot of other areas where that same attitude could profitably be applied.

Michael Duffy: Any suggestions?

Bryan Caplan: This one is a little bit tongue-in-cheek but I'll make it anyway; I suggested that it would improve things if the Council of Economic Advisors was able to, by some kind of vote, to declare legislation to be uneconomical and strike it down in the same way the Supreme Court strikes down restrictions on free speech as unconstitutional.

Michael Duffy: I love it. That's what they call in Hollywood a very high concept idea. Bryan, we're out of time but thanks very much for joining us today on Counterpoint.

Bryan Caplan: Thank you very much for having me, Michael, it was a lot of fun.

Michael Duffy: Bryan Caplan is Associate Professor of Economics at George Mason University, and his book is called The Myth of the Rational Voter. That's from Princeton University Press. Some interesting comments there on military activity by governments.